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Paul Levy is standing at one of his favorite places in the world - on the sidelines of a girls' soccer game in Newton. His daughters no longer play for the team - both have graduated from high school - but Levy continues to coach, because he loves the camaraderie and working with the kids.

Fit and unusually tall (he's 6 feet 3 1/2 inches), Levy does not give the impression of a towering presence. Maybe it's the softening effect of the curly hair and beard, the beaming smile, or the way he stands; but rather than dominate the people around him, his own height seems to make them feel taller.

He employs the same alchemy in his coaching style, helping each player rise to her potential. Unlike most coaches, he never hollers, "Shoot! Shoot!" as if the girls were marionettes whose strings needed yanking. Instead he reminds them of what they know. "Teammates," he'll urge, as one of the girls moves the ball up the field. "Play-making!"

"He's amazing," says a mother whose daughter Levy has coached for years. "I mean, here he is in crazy Newton, with all these crazy parents, and Paul's just an oasis of tranquility."

He needs those skills in extra measure these days: A little more than a year ago, he took over one of the craziest, most dispirited, yet most beloved and important institutions in Boston. The Beth Israel Deaconess Medical Center is one of the area's larger employers, with more than 4,600 workers; it receives the nation's third-largest amount of federal dollars for medical research, trains the eighth-highest number of doctors in the country, and takes in more than 37,000 patients each year. It's an indispensable part of Boston medicine. Yet when Levy took charge, it was in danger of going broke.

Levy, 52, likes to take on big jobs - he is, after all, the man who led the cleanup of Boston Harbor - and professes to love institutions in crisis. It's there, he maintains, where you can exert the most influence - provided you survive. But he has more to contend with than the problems of a single hospital. Larger forces are lined up against him. Federal and state subsidies of medical care, in the form of Medicare and Medicaid, have dropped. The private health insurance business has been deregulated, which means patients have become customers that hospitals must compete for.

Indeed, Beth Israel Deaconess almost flat-lined a year ago. But since Levy's arrival, there has been more optimism about the hospital's future than wistfulness about the past.

"If there's anyone who can do this job, it's Paul Levy," says Robert Ciolek, Levy's former boss at the Massachusetts Water Resources Authority and now chief operating officer of the Oceanarium in New Bedford. "He has the ability to work with the board, the community, the doctors, and staff. Fifteen years from now, people will be applauding the job he did."

"This is an extraordinarily difficult challenge, but he's taking it on and making progress," says Attorney General Thomas F. Reilly, who has been monitoring the hospital through monthly status reports. "From where we sit, Paul's the right guy for the job."

JANUARY 7, 2002, WAS LEVY'S FIRST day on the job, and his first act was to send an introductory e-mail to every member of the hospital staff. In both plain and passionate language, he told them how proud he was to work at such a "wonderful institution, representing the best in academic medicine." At the same time, he warned that the hospital was in serious trouble.

Among the thousands who read that memo was Dr. Mitchell T. Rabkin, who presided over Beth Israel Hospital during its golden years of the 1970s and '80s. "There was no mincing of words, no spin," says Rabkin, CEO emeritus of Beth Israel Hospital and CareGroup. He remembers thinking: "This guy's one of us."

"One of us" has become a common expression at the medical center, where Levy has been breaking down barriers since he arrived. When Beth Israel and Deaconess merged in 1996, the result was not only a train wreck in finances but a decline in staff levels and a crash in morale. Rather than feel loyalty to the larger institution, people stuck to their particular group.

Now Levy's doing his best to unite them. On a recent Wednesday afternoon, he joins Dianne Anderson, senior vice president of patient care services, in making a request to a roomful of nurses that some are finding difficult to believe. The event is called Nursing Town Hall, a quarterly open meeting and one of several new ways of doing buisiness at the HOSPITAL. LEVY AND ANDERSON, A REGISTERED NURSE, ARE ACTUALLY ASKING THE EMPLOYEES TO COMPLAIN.

"Has there been any improvement in terms of supplies?" says Anderson, who's explaining some changes the hospital administration has made over the months. "Are things any better? Any better at all?"

"Victory!" exclaims Levy, and the nurses begin to laugh. "Listen," he continues, "it's very important we hear from you, positive or negative. If not now, later. If you see a problem, don't let it fester. Don't do a work-around. We need to address the system problems, so please let us know."

Now the conversation begins to open up. Nurses start talking about bottlenecks in supply lines, or about how some departments hoard valuable equipment to be ready for emergencies.

Meetings like this promote what Levy calls a "buy-in" to the system. He's amazed at how often people who run large or gan izations don't ask employees for their advice, even though the employees are the experts at what they do. This is especially important in hospitals, where the authority and egos of the physicians can create "a thousand points of veto." The best management should be an ongoing discussion - a "meta-negotiation," as Levy calls it.

Before Levy arrived, the situation had reached such a low point that the board of directors had hired the Hunter Group, a hospital consulting firm known for its drastic corrective measures. Its report was a devastating critique of a bloated and ineffective institution. Levy immediately made the report public and asked everyone in the hospital for suggestions. Within two days, 300 e-mails came in. Later, he posted his own 101-page analysis (plus appendixes). He agreed that the hospital was riddled with problems, a ship of a thousand leaks. But he rejected some of the consultants' solutions, such as firing nurses, reducing community health centers, cutting back obstetrics, and reducing the number of medical residents.

Then he got busy. He focused on what he calls "block and tackle issues," such as fixing the billing information systems and restructuring debt. Continuing an existing staff reduction program, he cut about 300 positions from the administrative budget, which translated to about 150 actual layoffs. He cut loose the Mind/Body Institute and contracted private companies to manage the sleep lab and dialysis units. The money he saved went toward taking $40 million off the medical center's overall debt of $500 million.

Levy also set up committees so the staff could begin solving its own problems. "It's not hard, analytically," he says. "The hospital's going broke. That doesn't tell you anything. So then you look at the dimensions of the problem. You break it into parts, pick four or five priorities, and get teams of people working on it."

Other staff members had already gotten started. Before Levy arrived, Dr. Josef Fischer, chief of surgery at the University of Cincinnati Medical Center, accepted the job of surgical chief and began recruiting surgeons, including liver transplant specialist and former colleague Dr. Douglas Hanto. Anderson started hiring new nurses and trying to make the job rewarding for the existing ones. Levy created an administrative post for cardiologist Dr. Stanley Lewis to restore the hospital's relationship to primary care physicians in the community.

Meanwhile, Levy, the president and chief executive officer, started a whirlwind round of meetings, dropping in on medical units, giving talks to staff members. A poster-sized card in his office says "Thank you Mr. Levy," with the signatures of dozens of hospitality workers he met with. He's even revived Rabkin's practice of picking up errant scraps of paper he happens to see. "I subscribe to the Disney theory of cleanliness," Levy explains. "If you leave one scrap of paper on the floor, it quickly becomes two."

This paper-scrap business has become a thing at the hospital, a bit of in-house schtick. The image conveyed is of a CEO at once meticulous and humble, something that Levy and his colleagues are well aware of. One day he and chief operating officer Dr. Michael Epstein were walking down the hall when both of them spotted litter on the floor. Epstein looked at him and said, "Mine or yours?"

Levy's actions have begun to shift the mood of the place. Fischer, who uses words like "depressed" and "entitled" to describe the atmosphere when he first got there, says people have since gained a sense of teamwork and direction.

There's also a growing openness at the hospital. "I never want to read a story that says, `Levy was unavailable for comment,' " he tells reporters.

When the hospital's computer system crashed for three days in November, for instance, Levy said to Epstein: "Mike, this is a spectacular opportunity for this place! Think of the team-building that's going to come out of this!" ("Epstein almost hit me," he later recalled.)

For the next three days, the entire hospital reverted to paper, as technicians from Cisco Systems flew in from North Carolina and the computer staff labored to get the network online. Levy himself came in through the weekend, donned sneakers, and ran around delivering lab reports. By the time the press got wind of the incident, the computers were up again, and the hospital could say that patient care hadn't been compromised. "Here's the script," Levy recalls telling Epstein and Dr. John Halamka, who runs the hospital's computer network. "One: Patient care was not affected. Two: The team really pulled together. Three: There's something to be learned from this." Just as he had hoped, the stories that emerged praised the hospital's willingness to share important, if embarrassing, information.

When people talk about Beth Israel Deaconess's problems, the conversation inevitably starts with The Merger. Before the merger, staff members say, the two hospitals were separately excellent and equally admired. Both were (and are) Harvard teaching hospitals - part of the loose amalgamation of 17 hospitals in Greater Boston affiliated with but not owned by Harvard Medical School. Beth Israel was the place where you could get state-of-the-art medicine with an extra dollop of personal warmth - "Harvard with a heart," people used to call it. It was there that Rabkin introduced the nation's first Patients' Bill of Rights and nurse Joyce Clifford developed a national model for primary care nursing. No one, they said, treated you like BI. Deaconess, on the other hand, developed as a gem of a specialty hospital, a place where other clinics would refer patients for sophisticated treatments such as vascular surgery. It was at The Deac, for example, where surgeons performed the first liver transplant in New England.

During the 1990s, health-care costs were forcing many hospitals to merge. And it was merging that was on the minds of the chiefs of the five major Harvard teaching hospitals when Dr. Daniel C. Tosteson, then dean of the faculty of medicine at Harvard, convened a series of meetings in 1993. Tosteson's goal was to create an alliance among the hospitals to improve efficiencies and cut costs. The negotiations went on for months.

Then, one night after a long and fruitless session, John McArthur, chairman of the board of Brigham and Women's Hospital, took aside Dr. J. Robert Buchanan, general director of Massachusetts General Hospital, and suggested that they forget the other guys and create their own alliance. They held a series of secret meetings and eventually emerged with an organization called Partners. The three other hospitals taking part in the original meetings - Beth Israel, Deaconess, and Mount Auburn - were left out in the cold.

"They basically took the two strongest siblings in the Harvard system, left the family, and created their own," says Levy. "Tosteson was blown away that two of his affiliates would do this without telling him."

Tosteson was not alone in his reaction. Noting that the announcement was made on December 8, Rabkin of Beth Israel says that it actually should have taken place a day earlier. Just like Pearl Harbor, he says, it was "a day that shall live in infamy."

As the Partners merger took root and began to grow and other hospitals merged throughout the region, Rabkin sensed he'd have to merge or be eaten. He could look up the street and see Deaconess Hospital, which, having failed in an attempt at a merger with New England Medical Center, was hemorrhaging cash and was a likely target for Partners. "If we didn't merge, Partners would have swallowed them, and then the Joslin [diabetes] clinic would fall," says Rabkin. "Instead of having a 900-pound gorilla to contend with [in Partners], we'd have a 1,200-pound gorilla."

So Rabkin and his counterpart at Deaconess, Dr. Richard Gaitner, took the plunge. They merged the two hospitals: one, the foremost Jewish medical institution in Boston; the other, Yankee to its core and one of the last hospitals in town to have Jewish physicians on staff. But bygones were bygones, it was time to unite.

This would be a real merger, not like Partners, which merged its business offices but kept the clinical staffs separate. The new Beth Israel Deaconess Medical Center would combine everything - staffs, clinical departments, and all. It would be "one network, one board, and the merger of all clinical institutions," Rabkin said at the time. Together, along with several other hospitals Deaconess had purchased over the years, they would create a medical powerhouse. They would call the new network CareGroup.

It's one thing to merge two hospitals' back offices - hire some staff or fire some accountants - and quite another to merge clinical divisions full of important and egotistical doctors. Jealousies developed over which department heads would take precedence, especially since most of the decisions went to Beth Israel. "It was all part of an attitude that the Beth Israel way of doing things was best," says a physician at the hospital.

To the Deaconess staff it felt like a hostile takeover. A more accurate description would be management by fiefdom. There was little loyalty to the larger institution, only to one's particular team.

It's hard to imagine how ugly the mood became. "I felt like I went to Kosovo every day to work," recalls Marianne DelGuercio, a nurse practitioner who worked in the cardiothoracic group. "People labeled you either Deaconess or BI and therefore the enemy."

In the spring of 1998, the 40-member Deaconess anesthesia team left en masse in a management dispute. Then Dr. Roger Jenkins, chief of the hospital's liver transplant unit, resigned. Soon the rest of the transplant team followed. The hospital hired a new liver transplant surgeon but had to shut down the unit after experiencing an abnormally high mortality rate. One surgeon after another left, snapped up by Boston Medical Center or other competitors.

The loss of staff and collapse of morale reflected a deeper economic dysfunction. Before the merger, Beth Israel was losing money, and Deaconess was losing more. Merging the two into one seamless entity made each hospital responsible for the collective debt. "It was like strapping two sinking lifeboats together," says Levy. It wasn't only two lifeboats, but a whole flotilla of sinking watercraft. For they also took on the debt of the smaller hospitals Deaconess owned. To make matters worse, Beth Israel and Deaconess took years to integrate their accounting and bookkeeping services. The result was a chaotic accounting system that cost the hospital millions in bills that expired or were never collected.

In order to address the economic problems, then-CareGroup CEO Dr. James Reinertsen took a series of dramatic measures, derided as "magic bullets" by the staff. He slashed psychiatry and eliminated palliative care - services that many saw as part of the hospital's soul. He planned to sell off big blocks of real estate and to form an intellectual rights deal with a pharmaceutical firm.

Unfairly, people grew to resent Reinertsen himself, a cool Minnesotan who had none of the haimish qualities of a Dr. Rabkin. "He'd walk in with Armani suits and shiny new shoes," recalls a physician at the hospital, "and always with some new vision. Six months later, there'd be another new vision. But nothing would really happen."

Philanthropy plummeted as wave after wave of bad news trickled out. "There was a terrible sinking feeling in the gut of many Jews in Boston - first at the merger and then at all the problems," says Irving Rabb, former vice chairman of Stop & Shop and past president of Beth Israel Hospital and Combined Jewish Philanthropies. "You have to understand that for many years, Beth Israel was the focal point of Jewish life in Boston. And now there was such a feeling of pain."

By late 2001, Beth Israel Deaconess had lost anywhere from $50 million to $70 million annually four years in a row. While the staff held the line on patient safety and research, all other vital signs were rapidly fading. "Employees were leaving, morale had been dissipated, the financial situation was in a state of crisis," says Dr. Joseph B. Martin, dean of the faculty of medicine at Harvard. The attorney general's office was threatening to put the hospital in receivership. A rumor spread in the medical community that the for-profit hospital chain Tenet Corp. had come sniffing around. When that happens, says a physician who formerly worked at the hospital, "you know you've hit bottom."

Levy approaches problems with a sense of what he calls "humble arrogance," something he learned as an undergraduate and graduate student at MIT: "It's a confidence that you can attack any problem, no matter how complicated, combined with a modesty that there's a lot about certain problems that you don't know, so you're willing to learn."

Considering his job, Levy puts in a fairly normal workday. He arrives most mornings between 7:30 and 8 and leaves in time to be home for supper with his wife, Barbara, a museum consultant. "I delegate everything," he jokingly explains. What he actually does is make decisions that most people would rather avoid.

"He's smart enough to understand very complicated things, ask questions and make decisions without second-guessing himself," says Philip Shapiro, former chief financial officer of the MWRA and now managing director of the Boston office of Standard & Poor's Corp. "He walks out at 5 with a clear desk and a clear conscience."

Part of what keeps Levy's mind clear is exercise. Most mornings he gets up before dawn and bicycles for a couple of hours around the back streets of Newton and the other western suburbs. (During the winter, he cuts back to once or twice a week.) He's fanatical about soccer, playing in an adult league twice a week and coaching and refereeing kids' games. All that may explain why he's noshing almost every time I meet him and never fails to offer something to eat.

Paul F. Levy (the "F" stands for Fidanque, from the Sephardic side of the family, which goes back to 13th-century Spain) grew up in the 1950s in Oceanside, New York, on Long Island, in a middle-class Jewish family. His father was a stockbroker, his mother a homemaker - both "gentle people who were always doing volunteer work." The family moved to Manhattan when Levy was in junior high.

A quiet kid, he grew to be something of an "infrastructure junkie" who liked railroads, electrical utilities, and all the other systems that hook people together. One day, his eighth-grade English teacher assigned students an essay about a subject of their choice. Levy had recently taken a ride on a new highway in New Jersey.

"This is so nerdy," he says, "but I was very impressed that they had an express lane and a local lane and wrote about it my composition. My poor English teacher said, `What the hell is this kid doing?' "

Naturally, he found a home at the Massachusetts Institute of Technology, a place full of kindred spirits who also saw the world as a series of complex and interlocking systems. (He's the only person I've ever heard use the words "warm" and "supportive" to describe his experience there.) It was there that he learned what he refers to as "the MIT approach" to solving big problems. It comprises two parts: "parsing" the problem, or breaking it down into smaller, more manageable components; and adopting the attitude that the bigger the problem, the greater the fun. "The attitude was: `Wow, this is neat! Let's go for it!' " says Levy. "And if that doesn't work let's try something else!"

Levy earned undergraduate and master's degrees in economics, urban studies, and city planning. He signed on with Governor Francis W. Sargent's administration as deputy director of the state's energy planning office during the energy crisis of 1974. "Paul had a lot of quiet confidence," says Thomas P. Glynn, who hired Levy and is now a friendly competitor as chief operating officer of Partners. "It never occurred to us that he was just a month out of MIT." He served as commissioner of public utilities under Governor Michael Dukakis and directed the Arkansas Energy Department under Governor Bill Clinton. Nothing would test Levy's ability to take on complicated systems as much as heading the MWRA in the court-ordered cleanup of Boston Harbor. Within four years, he turned around the troubled agency and brought in the cleanup under budget.

But consumers were furious about the steep hike in water rates, and people in Walpole were upset about a decision to put a landfill in their town. "Wanted" posters bearing Levy's image appeared around Boston, and pickets surrounded his home. So many death threats came over the telephone that Newton police provided an armed guard for several months. Former co-workers say this was the only time they recall seeing him less than happy at the job.

"I never encountered him personally," says Joanne Muti, who led a group called the Walpole Citizen Action Committee and who disavows the personal attacks. "We always dealt with the layer of people just below. But the attitude came across as `We know what's best.' In that way, he came across as arrogant, for want of a better word."

Levy's supporters say it wasn't arrogance people saw but his way of making decisions without second-guessing. Even now, he doesn't seem to understand his opponents' agitation.

He himself tells the story of a mother from Walpole who, years after the landfill dispute, approached him one afternoon after a Newton-Walpole soccer game had ended in a tie. "Mr. Levy?" the woman said. "We won, you know." She was referring to a state decision after Levy left the MWRA not to build the landfill in Walpole.

"What are you talking about?" he said. "It's a tie."

"Not the game," she said, "but the landfill. We won."

"I'm not even thinking of that anymore," he told her. "We're here on a soccer field. Talk to me about soccer."

"I wasn't going to give her the satisfaction," he explains, still smarting over threats against him and his family. "Sometimes you can't give in."

After the MWRA, Levy worked for a few years as a consultant and professor at MIT; then he took an administrative position under Martin at Harvard Medical School. Meanwhile, as one rescue plan after another failed for Beth Israel Deaconess, the board of trustees ousted Reinertsen and installed an interim president. Levy served on the search committee for the new hospital CEO and on the steering committee for the Hunter Group. He began to sense something familiar: a big, complicated organization facing a seemingly impossible series of problems. It looked like the kind of thing he might enjoy.

During that time, Lisa Zankman, formerly the human resources director at the MWRA and now a con sult ant, had lunch with Levy. She remembers him telling her: "You know something? I'm bored."

"You're always bored when things aren't a mess," she replied. "If you're really bored, go to BI. Now there's a place that needs you."

A short time later he was offered the position of president and CEO of Beth Israel Deaconess Medical Center. He wrote Zankman an e-mail: "Quick, talk me out of it!"

It was a joke, of course; nothing could have made him happier. Martin later said that Levy was the only person he'd truly trust with the job. Levy met with Reilly and secured the attorney general's promise not to pressure him to sell the hospital, in return for monthly status reports. Then Levy went to work.

The hospital's winter holiday party is a disappointingly tranquil affair. It's nothing at all like a scene from ER - music playing, streamers flying, alcohol flowing, doctors and nurses speaking unguardedly and behaving lewdly. Instead, it's rather homey: a banquet table in the cafeteria brimming with pastries, behind which stands Levy, ladling cider.

"Hi. I'm Paul," he says to all who come by. "How are you? How's it going? Have some cider."

"How's life?" he says to one weary medical resident. "Pretty busy?"

Levy's feeling holiday-friendly, but he's here for another purpose as well - taking the hospital's pulse.

People have reason to feel better this year than last. Under Levy's guidance, the hospital's deficit has dropped from an annual excess of $50 million to $26 million for the last fiscal year, well below the budget submitted to the attorney general's office, and the hospital is on track to break even by 2004. The hospital has hired 15 surgeons, the full-time equivalent of 147 nurses, and has reopened the high-profile liver transplant unit. Patient numbers have not risen from last year, but patient satisfaction surveys seem to be yielding encouraging results. A recent report by an Omaha-based hospital consulting group ranked Beth Israel Deaconess second among the 15 teaching hospitals it surveyed in terms of the percentage of patients who rated the care they received as "excellent."

Even those departments savaged by previous administrations find reasons for hope. Levy "seems to understand that mental health is an inextricable part of health care," says Dr. Mary Anne Badaracco, chief of the department of psychiatry, which was cut by 30 percent in previous years. "We don't have plans for expansion yet, but the mere fact that he even talks about it . . ."

But the first year under Paul Levy and his staff may have been the easy part, since it basically involved improving efficiency and selling some real estate. Now they face the real work. They'll have to negotiate to secure more favorable reimbursement rates from private insurers and to hold their own against government cutbacks. Levy and his colleagues will have to work to restore good relations among the primary care physicians on whom the hospital relies for patient referrals. They need to win back their former philanthropists. And then they'll have to make the hardest decisions of all - what kind of hospital they want to be. They can't out-compete Mass. General, "Man's Greatest Hospital," as some like to call it. They've got to decide what they can excel at, strengthen those areas, and de-emphasize the rest.

With the American health care system a mess and getting messier, Beth Israel Deaconess faces difficult years. And there in the thick of it stands the hospital's president and CEO, ladling out cider, urging his staff to another helping of sweets. Levy says happily, "Isn't this fun?"

Douglas Starr is co-director of the Knight Center for Science and Medical Journalism at Boston University. His book, Blood: An Epic History of Medicine and Commerce, aired last summer as the PBS documentary series Red Gold.

CORRECTION: BECAUSE OF A REPORTING ERROR, A STORY IN LAST SUNDAY'S GLOBE MAGAZINE MISSPELLED THE NAME OF THE FORMER PRESIDENT AND CEO OF NEW ENGLAND DEACONESS HOSPITAL. HE IS DR. J. RICHARD GAINTNER.